Home builder Standard Pacific Corp. announced net income of $94.76 million for the first quarter of 2006, up 15.4 percent from $82.12 million in first-quarter 2005, with earnings up 17 percent to a record $1.38 per share.
“This is on top of a 95 percent increase in earnings per share in last year’s first quarter,” said Stephen J. Scarborough, chairman and CEO.
The company reported a record 2,473 new-home deliveries in the first quarter, up 5 percent from the same quarter last year. Home-building revenues were up 5 percent to a record $879 million compared to first-quarter 2005. Earnings before interest, taxes, depreciation, and amortization was $196 million for home-building operations in the first quarter, up 35 percent over first-quarter 2005. The backlog, valued at $2.4 billion, was up 6 percent year over year.
Home-building pretax income for the 2006 first quarter increased to $152.6 million from $130.9 million in the year-earlier period. The increase in pretax income was driven by a 5 percent increase in home-building revenues and a 350 basis point improvement in the company’s home-building gross margin percentage, the company reported.
Home-building revenues for the 2006 first quarter increased 5 percent to $879 million from $836.3 million last year. The increase in revenues was primarily attributable to a 5 percent increase in new home deliveries (exclusive of joint ventures), combined with a slight increase in the company’s consolidated average home price to $354,000, according to the earnings announcement.
During the 2006 first quarter, the company delivered 619 new homes in California (exclusive of joint ventures), down 10 percent from first-quarter 2005. Deliveries were up 37 percent in Southern California to 451 new homes (excluding 27 joint venture deliveries); deliveries were down 53 percent in Northern California to 168 new homes (excluding six joint venture deliveries).
In Florida, the company delivered 717 new homes in the first quarter of 2006, representing a 12 percent year-over-year decline. The company delivered 359 homes (excluding six joint venture deliveries) during the 2006 first quarter in Arizona, a 19 percent decrease from the 2005 first quarter.
In the Carolinas, deliveries were up 40 percent to 236 new homes driven primarily by order growth from new community openings and improving market conditions. New home deliveries were up 218 percent in Texas to 432 new homes, and deliveries were up 4 percent in Colorado to 110 new homes for the quarter.
During the 2006 first quarter, the company’s average home price increased slightly to $354,000, from $353,000 in first-quarter 2005.
Our average home price in California was $696,000 for the first quarter of 2006, a 2 percent decrease from the year earlier period. The average price in Florida was up 28 percent from the year ago period to $264,000.
The average price in Arizona was up 37 percent to $268,000, up 13 percent in the Carolinas, and fell 16 percent in Texas. The average home price in the company’s new San Antonio division was $146,000.
“We expect that our average home price will increase approximately $38,000, or 11 percent, to $385,000 in 2006,” the company reported. “We are projecting a 2006 second quarter average home price of $373,000, up 8 percent over the 2005 second quarter average. The increase in the 2006 second quarter and full-year average home prices primarily reflect the significant increase in new-home prices experienced in the Phoenix market in 2005 and the moderate level of price appreciation experienced in the California and Florida markets over the same time period.”
The company’s 2006 first quarter home-building gross margin percentage was up 350 basis points year over year to 29.5 percent. The home-building gross margin percentage for the 2006 second quarter is expected to be in the 26 percent to 27 percent range, while the margin for the full year is expected to be approximately 25 percent to 25.5 percent. “Our 2006 full-year gross margin guidance reflects a stable new-home-price environment, consistent with past practices, and budgets in some markets for increasing sales incentives,” the company reported.
New orders companywide for the first quarter of 2006 totaled 2,520 homes, an 8 percent decrease from the 2005 first quarter, though the dollar value of the 2006 first-quarter orders was essentially flat compared to the year earlier period. “The overall decline in unit orders resulted from the slowing of demand in many of the company’s markets from the unsustainable pace of the past few years combined with the delay in a number of new community openings during the quarter due to weather and processing-related delays,” Standard Pacific reported.
Excluding joint ventures, new home orders were off slightly year over year in Southern California on a 28 percent higher average community count. In Northern California, new home orders were down 59 percent on a 19 percent lower average community count. New home orders were down 40 percent in Florida on a 13 percent lower community count. A number of factors contributed to the year-over-year decrease in Florida, the company reported, including: a softening in buyer demand, most notably in South Florida and Southwest Florida; reduced product availability in the Orlando and Jacksonville divisions; continued intentional slowing of orders in certain communities in Tampa to better align production and sales; and an increase in the cancellation rate. The company had over 85 percent of its 2006 targeted deliveries for the state in its backlog or closed as of March 31.
In Arizona, new home orders were down 5 percent on a 100 percent higher average community count. “The Phoenix market has clearly moderated from the unsustainable pace of the last few years. However, the company believes that absorption levels for new homes are returning to a more normal level accompanied by a generally normal level of cancellations,” Standard Pacific reported.
Orders were down 9 percent in the Carolinas on an 11 percent lower community count, and up 107 percent in Texas on a 56 percent higher average community count. In Colorado, orders were up 3 percent on a flat community count.
The company’s cancellation rate (excluding joint ventures) for the 2006 first quarter was 24 percent, up from the year earlier rate of 17 percent, but down slightly from the 2005 fourth quarter. The company’s cancellation rate was generally higher year over year in California, Florida and Arizona, ranging from approximately 20 percent in Arizona to 30 percent in California.
The 2006 first quarter backlog of 6,323 presold homes (excluding 197 joint venture homes) was valued at $2.4 billion (excluding $107 million of joint venture backlog), an increase of 6 percent from the March 31, 2005, backlog value.
The company ended the quarter with 195 active selling communities (excluding seven joint venture communities), a 17 percent increase over the year earlier period. The company is projecting to open approximately 140-145 new communities during 2006 compared to 92 last year with the openings weighted toward the second half of the year. As a result, the company is targeting 215 active communities by mid-year and 245 by the end of 2006, representing a 35 percent year-over-year increase.
“During the quarter, we continued to see evidence that many of our housing markets are moderating from the unsustainable pace of the past few years. While the dollar value of our orders were on par with last year’s first quarter, our unit orders were down 8 percent year over year,” Scarborough stated.
Contributing to this were: decreased affordability and increased loan qualification issues in markets that have experienced significant price appreciation; increasing supply in the resale market; and aggressive use of incentives by competitors to reduce inventory levels and stimulate demand, he added.
“For 2006, we expect to generate $6.50 per share, a 3 percent year-over-year increase. We are targeting approximately 12,300 deliveries, excluding 475 joint venture homes, and homebuilding revenues of approximately $4.8 billion, up 8 percent and 20 percent year over year, respectively. Our expectations for the year are bolstered by our backlog of over 6,300 homes, valued at $2.4 billion, which, while subject to cancellations, represents over 70 percent of our projected 2006 delivery target when combined with our first quarter deliveries. We are also providing initial guidance for the second quarter of 2006. We are projecting approximately 2,875 deliveries, excluding 55 joint venture homes, and home-building revenues of approximately $1,075 million, while targeting earnings of $1.45 per share,” the company reported.
The company is holding a conference call at 11 a.m. Eastern Time today to discuss the company’s 2006 first quarter earnings. The call will be broadcast live over the Internet and can be accessed through the company’s website at http://standardpacifichomes.com/ir. The call cam also be accessed at (800) 946-0712. The entire audio transmission with a synchronized slide presentation will also be available on the company’s Web site for replay within two to three hours of the live broadcast, and can be accessed by calling (888) 203-1112, passcode: 6282548.
